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NCI Building (NCS) to Report Q3 Earnings: What's in Store?

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NCI Building Systems, Inc. is scheduled to report third-quarter fiscal 2018 results, after the market closes on Aug 28.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 38.89%. Also, NCI Building topped the consensus mark in three out of the trailing four quarters, with an average positive earnings surprise of 25.02%.

The company has been benefitting from its focus on growth strategy around Insulated Metal Panels or IMP, as well as investments in automation and process innovation, and delivering further cost reductions with Lean and Six Sigma initiatives.

Let’s see how things are shaping up for this announcement.

Key Factors

NCI Building is poised to gain from its focus on executing advanced manufacturing and improvement initiatives. Continued commercial discipline in the pass-through of higher material costs across all segments combined with strong volume growth in Metal Components and IMP segments, along with improvement in package volumes in the Metal Coil Coating segment are expected to bring about year-over-year growth in the quarter to be reported.

Furthermore, the company’s focus on investments in automation and process innovation is likely to slash operating costs and improve margins, quality and service in the quarter to be reported. Importantly, higher pricing is expected to offset the recent inflation in material and labor costs, also benefiting its gross margin.

In the last reported quarter, the company’s adjusted earnings advanced 56% year over year on 8.7% sales growth. The trend is expected to have continued in the fiscal third quarter as well.

For third-quarter fiscal 2018, NCI Building anticipates revenues within $525-$545 million and adjusted EBITDA in the range of $56-$66 million. Meanwhile, the Zacks Consensus Estimate for total revenues is pegged at $538.4 million, suggesting an increase of 14.7% year over year.

Overall, the Zacks Consensus Estimate for earnings is pegged at 48 cents per share, reflecting an increase of 77.8% year over year.

Here is What Our Quantitative Model Predicts:

Our proven model does not show that NCI Building is likely to beat on earnings in the to-be-reported quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: NCI Building has an Earnings ESP of -4.17%. This is because the Most Accurate Estimate of 46 cents is pegged lower than the Zacks Consensus Estimate of 48 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NCI Building currently carries a Zacks Rank #1. Although this increases the predictive power of ESP, the company’s ESP of -4.17% makes an earnings prediction uncertain.

Notably, stocks with a Zacks Rank #4 or 5 (Sell rated) should be avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Armstrong World Industries, Inc. (AWI - Free Report) reported adjusted earnings of $1.01 per share in second-quarter 2018, missing the Zacks Consensus Estimate by 2.9%. However, the reported figure increased 16.1% from 87 cents per share in the prior-year quarter.

Masco Corporation (MAS - Free Report) reported mixed second-quarter 2018 financial numbers, wherein earnings missed the Zacks Consensus Estimate by a penny but revenues surpassed the same by 0.3%. However, the top and bottom lines increased 11% and 21%, respectively, on a year- over-year basis.

Aegion Corporation posted mixed results in the second quarter of 2018, wherein earnings lagged analysts’ expectation while revenues surpassed the same. Meanwhile, total revenues in the quarter declined 5.5% but earnings increased 3% year over year.

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